first time buyers who rent house out

[rob30]

I know a lot of people in my profession who bought new houses recently, and qualified for stamp duty relief ( and when possible, got the first time buyers grant). Many have moved abroad to continue training for a few years and are renting their homes out.

When they return, and go to sell their houses, surely revenue will know that they were non residents for a while as they would not have completed tax returns. Since they were not living in their houses for all the time, will they have to backpay the stampduty?

How long must you be living back in your primary residence for, after renting it out, so that it no longer is liable to capital gains when you sell it?

I can see a lot of people getting caught out this way

 

[ClubMan]

I know a lot of people in my profession who bought new houses recently, and qualified for stamp duty relief ( and when possible, got the first time buyers grant). Many have moved abroad to continue training for a few years and are renting their homes out.

Unless they were seconded to work abroad as opposed to simply choosing to go then they are liable for a clawback of SD as soon as they rent the property out if this happens within the first five years of ownership. They also no longer qualify for owner occupier mortgage interest tax relief at source although they can offset 100% of mortgage interest and other allowable expenses against rental income. Oh - and obviously they are assessable for income tax on the rental income.

When they return, and go to sell their houses, surely revenue will know that they were non residents for a while as they would not have completed tax returns.

If they are not paying the SD clawback (if applicable), are not declaring rental income and are still claiming owner occupier mortgage interest tax relief then they are engaging in fraud and tax evasion.

Since they were not living in their houses for all the time, will they have to backpay the stampduty?

See above.

How long must you be living back in your primary residence for, after renting it out, so that it no longer is liable to capital gains when you sell it?

Only the first 12 months after vacating one's PPR is exempt from CGT when renting it out. Otherwise some portion of any eventual capital gain will be assessable for CGT based on how long the property was a rental property versus an owner occupied property. For example if the property was owned for 7 years, lived in for 2 and rented for 5 then (5-1)/7 = c. 57% of any eventual resale gain would be assessable for CGT. This is apart from the SD clawback etc.

I can see a lot of people getting caught out this way

If that's what it takes for some people to meet their tax liabilities like the rest of us then bring it on.

 

[CN624]

Clubman, how do you think they will get caught out?

Will their solicitor blow the whistle? I doubt it. If a solicitor mentions stamp duty during the sale process can't the client just say they were living in it? If the solicitor pushes the issue can't the client can just go to a more compliant solicitor?

Do you think Revenue will eventually decide to investigate every sale over the last 5-10 years?

 

[Satanta]

Unless they were seconded to work abroad as opposed to simply choosing to go then they are liable for a clawback of SD

I've looked on the Revenue site for the details regarding being "seconded" and have yet to find them.
Presuming it's either worded in an unusual manner or else I'm just missing the wood for the trees. If someone can direct me to the details relating to "secondment" and "stamp duty" I'd be very thankful.

 

[ClubMan]

Clubman, how do you think they will get caught out?

Will their solicitor blow the whistle? I doubt it. If a solicitor mentions stamp duty during the sale process can't the client just say they were living in it? If the solicitor pushes the issue can't the client can just go to a more compliant solicitor?

Do you think Revenue will eventually decide to investigate every sale over the last 5-10 years?

Anything's possible - just look at the various investigations from bogus non resident accounts to tax evading life assurance policy holders over the years. Revenue are also rolling out a new profiling system to help them identify taxpayers who might be worth auditing.

 

[CN624]

Anything's possible - just look at the various investigations from bogus non resident accounts to tax evading life assurance policy holders over the years. Revenue are also rolling out a new profiling system to help them identify taxpayers who might be worth auditing.

I'm sure its possible on a smale scale, might be a new source of funds in a couple of years once they have trawled through the Life Assurance records.

For clarification, is it the solicitor's duty to inform a seller that SD is due on the transaction? If the seller says he doesn't want to pay it (who does!) can the solicitor legally continue with the transaction?

 

[liteweight]

Does a solicitor even ask if your house has been rented at any time? I can't remember what the procedure is. I'm sure a solicitor doesn't see him/herself as the stamp duty police!

 

[CCOVICH]

Even if you never sell the house, you may still be liable for stamp duty, as it is renting that triggers this liability, not selling.

If you buy a house, avail of Owner Occupier FTB exemption, then 2 years later rent it out, but subsequently return to live in the house 4 years later, how is a solicitor supposed to know?

On the secondment issue, it was raised here before.

Most of the issues re. evasion and 'can I get away with it' were aleady discussed in that same thread.

 

[Satanta]

On the secondment issue, it was raised here before.

Interesting, Revenue seem to clearly state that an OO can keep the FTB OO reliefs (re SD & CGT) if seconded away from the PPR for work reasons for up to four years.

It also states that any period of absence not exceeding 4 years where as a condition of your employment you are obliged to work abroad .A period of absence will only be ignored under the above rules if both before and after the total period of absence the house was occupied by the individual as
his/her principal private residence and throughout which he/she had no
residence or main residence eligible for relief.

I've yet to ever see any mention of this through any Revenue documents.

I'd assume that seeing as they are allowed keep their OO status, they would/could also still be eligible for the rent a room scheme? (even though they are not actually in the house or possibly the country for that matter)

I have a family member who may be in this position come January (still in discussions with work at the moment regarding the secondment). I'd be very interested to know if anyone has any further information on this element of the stamp duty saga (should revenue be informed in advance? do they just need to keep paperwork to prove the secondment? any Revenue documents which spell out the details relating to this?).

Obviously they would contact Revenue in advance of taking any action, but having some of the information to hand in advance would be great.

 

[hmmm]

The most obvious way they will be "caught out" is if the tenant submits a rent relief form (note that if the landlord comes to an "agreement" it just means they'll lose out twice if the tenant applies anyway). Revenue will quite happily accept a rent form without the landlords PPS number.

 

[Howitzer]

The most obvious way they will be "caught out" is if the tenant submits a rent relief form (note that if the landlord comes to an "agreement" it just means they'll lose out twice if the tenant applies anyway). Revenue will quite happily accept a rent form without the landlords PPS number.

To say that this is the most obvious way to get caught out is also somewhat misleading. Many landlords feel that by simply avoiding this route they are then home free (by possibly only renting to foreign nationals who aren't aware of the tax system).

I believe there will be property related amnesty/round up in the next couple of years. My understanding of how Revenue has pursued previous tax defaulters following amnestys is that a level of profiling is instigated and everyone who fits certain criteria are then asked to explain irregularites in their tax affairs. If legitimate answers aren't forthcoming you get hit with a big bill. Convoluted tales are simply dismissed out of hand.

This profiling may take the form of simply going through the registrar of people who've bought property in the last 10 years and sending a letter out to everyone who has more than one property and isn't registered with the PRTB, or in this case where someone is non tax resident after purchasing their property yet their bank account shows regular deposits from Jose Sanchez.

 

[ClubMan]

(by possibly only renting to foreign nationals who aren't aware of the tax system).

Slightly off topic but why do some people assume that foreign nationals are necessarily less likely to suss out the tax system in the host country and figure out what they are entitled to? It's not rocket science and the information is readily available (and in many different languages from the likes of OASIS and Revenue for example).

I believe there will be property related amnesty/round up in the next couple of years.

On what basis? I'd be more inclined to assume that Revenue are less likely these days to operate amnesties and more likely to simply purse aggressively tax evaders and defaulters.

 

[Howitzer]

Slightly off topic but why do some people assume that foreign nationals are necessarily less likely to suss out the tax system in the host country and figure out what they are entitled to? It's not rocket science and the information is readily available (and in many different languages from the likes of OASIS and Revenue for example).

Ok, that should be "(by possibly only renting to foreign nationals who they think aren't aware of the tax system)".

It is true though. I've lived in many foreign countries though I've absolutely no idea what even the basic tax rate was whilst I was there. Also, I have many foreign friends in Ireland who I spend hours with detailing the tax breaks they should be availing themselves of. They are always amazes at the complexity of our system and how much responsibility falls on them to claim certain things.

On what basis? I'd be more inclined to assume that Revenue are less likely these days to operate amnesties and more likely to simply purse aggressively tax evaders and defaulters.

Amnestys provide a good, and easy, mechanism of profiling non compliant tax defaulters.

Eg: "Looking at the list of people who've owned up we can see that Broker A and Solicitor B have been involved in a lot of these transactions, let's have a look at all their clients."